Home prices slip

Canadian home prices fell in June for the first time since January, 1999, as the number of houses for sale remained at record levels.

The average price of an existing home fell 0.4 per cent in June to $341,096, compared with $342,615 the year before, according to statistics released Tuesday by the Canadian Real Estate Association (CREA).

“The fall in home prices...is a sizable dip in this indicator, given that not too long ago the Canadian housing market was witnessing double-digit price gains,” Millan Mulraine, economic strategist at TD Securities Inc., said in a research note.

Of the 25 major markets included in the statistics, average home prices declined on a year-over-year basis in Calgary, Edmonton, Victoria and Windsor-Essex. The largest decline of 2.6 per cent was in Edmonton, while the smallest was in Windsor-Essex at 0.5 per cent.

Last month, BMO Nesbitt Burns Inc. economist Douglas Porter raised the possibility of an overall drop in home prices in Canada. Most industry watchers have stayed with the view that home prices will rise slightly this year.

In June, Mr. Porter said it was “unnerving” to note that Canada's housing market performance appears to be tracking that of the U.S. but with a two-year lag, although he also sees a number of differences between the two markets.

He said he was tracking prices in the “middle ground,” cities such as Toronto, Montreal and Ottawa, which still have fairly robust economic fundamentals but haven't been supercharged by the commodities boom.

Prices in those cities all rose moderately year-over-year in June, up 3.7 per cent in Toronto, 4 per cent in Montreal and 6.8 per cent in Ottawa.

The Canadian and U.S. markets are still very different, CREA president Calvin Lindberg said in a statement. U.S. home prices dropped by 14.1 per cent in the first quarter of the year, according to the benchmark Case-Shiller national home price index.

As price gains cooled in most markets, the number of resale homes listed nationally has hit monthly highs in April, May and June, and sales activity has continued to fall.

For the first six months of the year, listings on the Multiple Listing Service (MLS) reached a record level of 332,958, up 8.1 per cent from the previous record set the year before.

Listings in the past three months reached record, or near-record, levels in Toronto, Vancouver, Ottawa, Regina and Saskatoon, according to CREA.

In Edmonton and Calgary, which had an earlier and more pronounced housing boom than in many other regions, listings continued to decline from peak levels hit in March.

Across Canada, sales activity for the first half of the year declined 13.3 per cent from a year previously, to 169,265 units sold.

Sales fell most sharply in Greater Vancouver, where they dropped 42.9 per cent in June from the year before. Regina and Saskatoon also experienced declines greater than 30 per cent.

The increase in listings combined with slower sales made Vancouver, Regina and Saskatoon the “most balanced” major markets in June, according to CREA.

“The frenzied pace for sales activity last year has faded, with buyers now better able to shop around before making an offer,” Gregory Klump, chief economist at CREA, said in a statement. “Price increases are expected to be modest in the second half of 2008, as sales continue easing and new listings remain high.”

Markets with the greatest year-over-year decrease in unit sales in June

-Greater Vancouver - down 42.9 per cent
-Regina - down 33.8 per cent
-Saskatoon - down 32.7 per cent
-Victoria - down 24.4 per cent

Markets with the highest year-over-year increase in unit sales in June

-Trois-Rivieres - up 29.8 per cent
-Saguenay - up 11 per cent
-Saint John - up 4.2 per cent
-Ottawa - up 2.6 per cent

Markets with the greatest year-over-year price increases in June

-Regina - up 43.2 per cent
-Saskatoon - up 23 per cent
-Sudbury - up 20.6 per cent
-Saguenay - up 18.1 per cent

Markets with greatest year-over-year price declines in June

-Edmonton - down 2.6 per cent
-Calgary - down 2 per cent
-Victoria - down 1.1 per cent
-Windsor-Essex - down 0.5 per cent

Markets with the greatest year-over-year increase in listings in June

-Saskatoon - up 48.8 per cent
-Sudbury - up 45.1 per cent
-Regina - up 40.5 per cent
-St. Catharines & District - up 20.4 per cent

Markets with the greatest year-over-year decline in listings in June

-Edmonton - down 19.1 per cent
-Calgary - down 8.4 per cent
-Thunder Bay - down 7.1 per cent
-Windsor-Essex - down 7.1 per cent

(prepared by Lori McLeod/Globe & Mail/July 15, 2008)